Blending grants and loans for financing the EU’s development policy in the light of the Commission Proposal for a Development Cooperation Instrument (DCI) for 2014-2020

For the next Multiannual Financial Framework for 2014-2020, the European Commission proposes to introduce loan and grant blending facilities into the Development Co-operation Instrument (DCI). There are justified concerns, however, that these blending facilities are not appropriate to address many development needs and that the assistance, in the form of concessional loans, can put heavily indebted countries at risk. Nevertheless, the use of blending facilities in the DCI can be beneficial, if well devised. They should be used to complement but not substitute traditional development finance. Furthermore, care is required to ensure that blending instruments are effectively oriented towards poverty reduction, avoiding a return to a focus on investment.